National Income.

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CAFC – ECONOMICS

NATIONAL INCOME
 93242 77778

NATIONAL INCOME

1. _________ refers to money value of all the final goods and services produced by a
country during a year.
(a) National Income (b) Personal Income
(c) Personal Disposable Income (d) Government Income
2. National dividend measures money value of ________ goods and services produced
by residents of the country during current year.
(a) Producer (b) Consumer
(c) Intermediary (d) Final
3. National Income helps the Government to –
(a) Analyse the level of production and economic welfare in the economy
(b) Analyse the stability and growth of the economy
(c) Formulate appropriate economic policies to direct the economy
(d) All of the above
4. Domestic Territory includes -
(a) National frontiers of India
(b) Territorial waters of India
(c) Embassies, Consulates and Military Establishments of India, which are located
abroad
(d) All of the above
5. Domestic Territory includes –
(a) Ships and Aircrafts operated by the residents of the country between two or
more countries
(b) Fishing Vessels, Oil and Natural Gas Rigs, and Floating platforms operated by
the residents of the country in international waters, or engaged in extraction in
areas in which the country has exclusive rights of exploitation.
(c) Territory lying within the political frontiers, including territorial waters of the
country.
(d) All of the above
6. Which of the following concepts of National Income takes into consideration the
geographical boundries of a country, rather than the origin of the factors
of production?
(a) Gross (b) Net (c) National (d) Domestic

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
7. Concepts like GDP, GNP, NDP, NNP, etc. are measured at –
(a) Market prices (b) Factor cost
(c) Both (a) and (b) (d) Neither (a) nor (b)
8. Measurement at market prices constitute –
(a) External sale price angle
(b) Internal value addition angle
(c) Both (a) and (b)
(d) Neither (a) nor (b)
9. Measurement at factor cost constitute –
(a) External sale price angle
(b) Internal value addition angle
(c) Both (a) and (b)
(d) Neither (a) nor (b)
10. Which of the following constitute the reason for difference between market prices
and factor cost?
(a) Indirect taxes (b) Subsidies
(c) Both (a) and (b) (d) Neither (a) nor (b)
11. Which of the following equations is correct?
(a) Value at factor cost plus Indirect taxes minus Subsidies = Value at market prices
(b) Value at factor cost minus Indirect taxes minus Subsidies = Value of market prices
(c) Value at factor cost plus Indirect taxes plus Subsidies = Value at market prices
(d) Value at factor cost minus Indirect taxes plus Subsidies = Value at market prices
12. Which of the following equations is correct?
(a) Value at factor cost = Value at market prices plus Indirect taxes minus Subsidies
(b) Value at factor cost = Value at market prices plus Indirect taxes plus Subsidies
(c) Value at factor cost = Value at market prices minus Indirect taxes minus Subsidies
(d) Value at factor cost = Value at market prices minus Indirect taxes plus Subsidies
13. GDPFC = GDPmp - __________ + Subsidies
(a) Indirect taxes (b) Depreciation
(c) NFIA (d) None
14. GDP at factor cost = __________.
(a) GDP at market price + Subsidies
(b) GDP at market price + Subsidies – Indirect tax
(c) GDP at market price – Subsidies + Indirect tax
(d) GDP at market price + Subsidies + Indirect tax

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
15. Indirect taxes minus Subsidies is called –
(a) Net Subsidies (b) Net Indirect Taxes
(c) Gross Subsidies (d) Gross Indirect Taxes
16. The difference between values at market prices and factor cost is attributed to –
(a) Net factor income from abroad
(b) Depreciation
(c) Net Indirect Taxes
(d) All of the above
17. If NNP figure is available at market prices, we will ________ Indirect taxes and
________ subsidies to the figure to get National Income of the economy.
(a) Add, Subtract (b) Add, Divide
(c) Subtract, Add (d) Subtract, Divide
18. Concepts like GDP, GNP, NDP, NNP, etc. are measured at –
(a) Current prices (b) Constant prices
(c) Both (a) and (b) (d) Neither (a) nor (b)
19. When the value of output for each year is estimated on the basis of the prices
prevailing in that year, it constitutes measurement of –
(a) Current prices (b) Constant prices
(c) Both (a) and (b) (d) Neither (a) nor (b)
20. When the value of output for each year is estimated on the basis of fixed prices, or
prices prevailing at a earlier pint of time or in some earlier base year,
it constitutes measurement at –
(a) Current prices (b) Constant prices
(c) Both (a) and (b) (d) Neither (a) nor (b)
21. Measurement at current prices constitute –
(a) Nominal value (b) Real value
(c) Both (a) and (b) (d) Neither (a) nor (b)
22. Measurement at constant prices constitute –
(a) Nominal value (b) Real value
(c) Both (a) and (b) (d) Neither (a) nor (b)
23. _________ is the money value of all final goods and services produced in the
domestic territory of a country during an accounting year.
(a) Gross Domestic Product (b) Net Domestic Product
(c) Gross National Product (d) Net National Product

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CAFC – ECONOMICS
NATIONAL INCOME
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24. ________ is the measure of the market value of all final goods and services produced
by factors of production located within the boundaries of a country, during a
specified period of time.
(a) GDP (b) GNP
(c) National Income (d) Personal Income
25. Net Domestic Product (NDP) equals –
(a) GDP plus Depreciation (b) GDP minus Depreciation
(c) GNP plus Depreciation (d) GNP minus Depreciation
26. Allowance given for using Capital Equipment for production is known as –
(a) Appreciation (b) Deficit
(c) Loss (d) Depreciation
27. Depreciation Allowance is also called as –
(a) Fixed Asset Allowance (b) Capital Allowance
(c) Capital Consumption Allowance (d) None of the above
28. The difference between GNP and NNP equals –
(a) Consumer expenditure on durable goods
(b) Indirect business taxes
(c) A statistical discrepancy
(d) Depreciation
29. __________ is the sum of the Gross Domestic Product and Net Factor Incomes from
abroad.
(a) Gross Domestic Product (b) Net Domestic Product
(c) Gross National Product (d) Net National Product
30. Net National Product (NNP) equals –
(a) GDP plus Depreciation (b) GDP minus Depreciation
(c) GNP plus Depreciation (d) GNP minus Depreciation
31. National Income refers to ________ at factor cost.
(a) Gross Domestic Product (b) Net Domestic Product
(c) Gross National Product (d) Net National Product
32. National Income means –
(a) GNP at Market Price (b) NNP at Market Prices
(c) GNP at Factor Cost (d) NNP at Factor Cost

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
33. Net National Product at factor cost can be calculated as –
(a) NNP at market prices less Net indirect taxes
(b) GNP at factor cost less Depreciation
(c) NDP at factor cost plus Net factor income from abroad
(d) All of the above
34. National income differs from Net National Product at market price by the amount
of –
(a) Net indirect taxes (b) National interest
(c) Subsidies (d) Current transfers from the rest of the world
35. Which of the following statements regarding National Income is true?
(a) National income fails to account for non-marketable household production
(b) Goods and services produced and consumed by the individuals for themselves
are indicated in the National Income
(c) All transactions involving illegal and underground activities are valued and
reported in National Income
(d) National Income accounts consider all the implications of productive activities
and the events of nature in an economy
36. Which of the following statements regarding National Income is false?
(a) Housework done by housewives is not included in the National Income
(b) In agricultural sector, the value of the commodities consumed by the farmers is
included in the National Income
(c) Most of the underground activities in the economy are unreported and are not
included in National Income accounts
(d) National Income fails to take into account the human cost of employment in
terms of physical and mental strain
37. What is the usual effect of double counting on the National Income?
(a) National Income shows a lower figure
(b) National Income gets exaggregated
(c) National Income remains same, even in the case of double countring
(d) Double-counting can never take place while calculating the National Income
38. The difference between the GDPmp and GNPmp is –
(a) Net factor income from abroad
(b) Depreciation
(c) Net income
(d) None of these

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
39. GDP at market prices =
(a) GNP at MP – Depreciation (b) GNP at MP – NFIA
(c) GNP at FC – Depreciation (d) GNP at FC – NFIA
40. If Net factor income from abroad is positive, then which of the following is true?
(a) GNP > GDP (b) GNP = GDP (c) GNP < GDP (d) None of the above
41. If net factor income from abroad is zero, then which of the following is true?
(a) GNP > GDP (b) GNP = GDP (c) GNP < GDP (d) None of the above
42. If Net factor income from abroad is negative, then which of the following is true?
(a) GNP > GDP (b) GNP = GDP (c) GNP < GDP (d) None of the above
43. If Net factor income from abroad is positive, then which of the following is true?
(a) NNP > NDP (b) NNP = NDP (c) NNP < NDP (d) None of the above
44. If Net factor income from abroad is zero, then which of the following is true?
(a) NNP > NDP (b) NNP = NDP (c) NNP < NDP (d) None of the above
45. If Net factor income from abroad is negative, then which of the following is true?
(a) NNP > NDP (b) NNP = NDP (c) NNP < NDP (d) None of the above
46. GDP at market price less Net indirect taxes equals
(a) GNP at market price (b) GDP at factor cost
(c) NDP at market price (d) NDP at factor cost
47. GDP at market price less Depreciation equals –
(a) GNP at market price (b) GDP at factor cost
(c) NDP at market price (d) NDP at factor cost
48. GDP at factor cost less Depreciation equals –
(a) GNP at market price (b) GDP at factor cost
(c) NDP at market price (d) NDP at factor cost
49. GDP at market price plus Net factor income from abroad equals –
(a) GNP at market price (b) GDP at factor cost
(c) NDP at market price (d) NDP at factor cost
50. To convert, GDPmp ______ GNPmp
(a) Add dep. (b) Add NIT (c) Add NFIA (d) All of the above
51. GDP at factor cost plus Net factor income from abroad equals –
(a) GNP at market price (b) GNP at factor cost
(c) NDP at market price (d) NDP at factor cost
52. GNP at market price less Net indirect taxes equals –
(a) GDP at market price (b) GNP at factor cost
(c) NDP at market price (d) NDP at factor cost

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
53. GNP at market price less Depreciation equals –
(a) NNP at market price (b) GNP at factor cost
(c) NDP at market price (d) NDP at factor cost
54. GNP at factor cost less Depreciation equals –
(a) NNP at market price (b) NNP at factor cost
(c) GDP at market price (d) GDP at Factor cost
55. NDP at market price less Net indirect taxes equals –
(a) NNP at market price (b) GNP at factor cost
(c) GDP at market price (d) NDP at factor cost
56. NDP at market price plus Net factor income from abroad equals –
(a) NNP at market price (b) NNP at factor cost
(c) GDP at market price (d) NDP at factor cost
57. NDP at factor cost plus Net factor income from abroad equals –
(a) NNP at market price (b) NNP at factor cost
(c) GDP at market price (d) NDP at factor cost
58. Suppose, NDPmp is constant and depreciation is increasing then GDPmp
(a) Decreases
(b) Increases
(c) Decreases with same amount as depreciation
(d) Increases with same amount as depreciation
59. Which of the following equations regarding GDP or GNP at market prices is true?
(a) GDP or GNP at market prices = GDP or GNP at factor cost less Indirect taxes,
less Subsidies
(b) GDP or GNP at market prices = GDP or GNP at factor cost plus Indirect taxes,
less Subsidies
(c) GDP or GNP at market prices = GDP or GNP at factor cost less Indirect taxes,
plus Subsidies
(d) GDP or GNP at market prices = GDP or GNP at factor cost plus Indirect taxes,
plus Subsidies
60. Which of the following equation is used to arrive at GNP at Factor Cost?
(a) GNP at factor cost = GDP at factor cost + Net factor income from abroad
(b) GNP at factor cost = GDP at factor cost × Net factor income from abroad
(c) GNP at factor cost = GDP at factor cost – Net factor income from abroad
(d) GNP at factor cost = GDP at factor cost + Net factor income from abroad –
Depreciation

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
61. Which of the following is incorrect?
(a) GNP at market price – Depreciation = NNP market price
(b) GNP at market price = NFIA – GDP market price
(c) GNP at market price = Net Indirect Tax = GNP at factor cost
(d) None of these
62. __________ is the net flow of output produced in an economy, after adjusting the
GNP by amount necessary to keep the existing capital intact.
(a) NNP (b) GDP (c) GNP (d) None of the above
63. The difference between values at Domestic level and National level is attributed to –
(a) Net factor income from abroad
(b) Depreciation
(c) Net indirect taxes
(d) All of the above
64. In the process of measuring the national income, the difference between national
and domestic product is known as –
(a) Net factor income from abroad
(b) Gross factor income from abroad
(c) Income deficit
(d) Income flow gap
65. The factor income earned by domestic residents abroad is 500 and the factor income
earned by foreigners in the country is 600. If the GNP of the country is 6000, the
GDP of the country is –
(a) 6100 (b) 5900 (c) 6000 (d) 6200
66. From the following information compute GNP at market price. GDP at factor cost =
3000, Net factor income abroad = 200, Indirect taxes = 420, Subsidies = 240
(a) 3380 (b) 2980 (c) 3020 (d) 2620
67. Raj, an Indian Citizen, is working for an Indian MNC in USA. The income earned
by Raj is part of –
(a) India’s GDP and USA’s GNP (b) India’s GDP and USA’s GDP
(c) India’s GNP and USA’s GDP (d) India’s GNP and USA’s GNP
68. The difference between Gross values and Net values is attributed to –
(a) Net factor income from abroad (b) Depreciation
(c) Net indirect taxes (d) All of the above

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
69. NNP at MP = NNP at FC, when there is –
(a) No Direct tax (b) No Indirect tax
(c) No Subsidy (d) No Indirect tax and no Subsidy
70. GNP excludes –
(a) Rental incomes (b) Interest payments
(c) Dividends (d) Government transfer payments
71. Which will increase GNP?
(a) A rise in the market price (b) A surplus in budget
(c) An increase in investment (d) A deficit in budget
72. GNP – NNP =
(a) Transfer payments (b) Capital consumption
(c) Value added (d) None of the above
73. National income at market prices, plus subsidies, but less indirect taxes is equal to
which one of the following?
(a) Gross National Income (b) National Income at Factor Cost
(c) Private Income before Cost (d) Net Consumer Income
74. ________ is the sum of all incomes actually received by individuals during a given
year.
(a) National Income (b) Personal Income
(c) Personal Disposable Income (d) Government Income
75. Personal income = Private income minus ________
(a) Saving of private corporate sector and corporation tax
(b) Consumption of fixed capital
(c) Direct taxes paid by households
(d) All of the above
76. ________ is the net amount available after meeting tax liabilities.
(a) National Income (b) Personal Income
(c) Personal Disposable Income (d) None
77. ________ is the net amount available for consumption and savings.
(a) National Income (b) Personal Income
(c) Personal Disposable Income (d) Government Income

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
78. Which of the following statements is not true?
(a) When the price level increases, nominal GDP increases even if no additional
goods and services are produced
(b) Personal disposable income is either consumed or paid as taxes
(c) Net investment equals Gross investment less Depreciation
(d) The higher the interest rate, the higher the opportunity cost of holding money
79. Consumption of a particular good or service depends on various factors such as
weather, tastes and preferences of the customer availability of the product and its
substitutes, etc. But consumption is primarily determined by –
(a) Spending habits (b) Taxes
(c) Disposable income (d) Savings
80. Which of the following fiscal policy instruments has a direct impact on people’s
disposable income?
(a) Government spending (b) Taxation
(c) Government savings (d) Interest rates
81. In a simple economy, National Income is –
(a) Equal to Disposable Income (b) More than Disposable Income
(c) Less than Disposable Income (d) Sometimes less than Disposable Income
82. National Income may be viewed as a –
(a) Flow of goods and services
(b) Flow of Incomes
(c) Flow of expenditure on goods and services
(d) All of the above
83. Which of the following is not, by definition, equal to National Income?
(a) National Product (b) National Expenditure
(c) National Output (d) National Wealth
84. National Income may be computed under …………… method.
(a) Product (b) Income
(c) Expenditure (d) All of the above
85. The three methods of computing National Income are -
(a) Production, Outlay and Income Methods
(b) Balance of Payments, Income and Consumption Methods
(c) Saving, Investment and Income Methods
(d) Outlay, Depreciation and Production Methods

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
86. Which of the following is not an approach used to measure National Income?
(a) Product Approach
(b) Two Sector Model in circular flow of Income
(c) Income Approach
(d) Expenditure Approach
87. Product Method focusses on measurement of National Income at -
(a) Phase of Production of Goods and Services
(b) Phase of Income Distribution
(c) Phase of Income Disposition
(d) All of the above
88. The production method of calculating national income is also known as …………….
(a) Value added method (b) Income method
(c) Expenditure method (d) None of the above
89. Income Method focusses on measurement of National Income at -
(a) Phase of Production of Goods and Services
(b) Phase of Income Distribution
(c) Phase of Income Disposition
(d) All of the above
90. Expenditure Method focusses on measurement of National Income at -
(a) Phase of Production of Goods and Services
(b) Phase of Income Distribution
(c) Phase of Income Disposition
(d) All of the above
91. …………... Method is suitable for measuring National Income in the case of
Agricultural Sector.
(a) Product (b) Income (c) Expenditure (d) All of the above
92. ……..... Method is suitable for measuring National Income in the case of Small Scale
Sector.
(a) Product (b) Income (c) Expenditure (d) All of the above
93. …..... Method is suitable for measuring Income in the case of Construction Sector.
(a) Product (b) Income (c) Expenditure (d) All of the above
94. …..... Method is suitable for measuring Income in the case of Developed Countries
persons file their income-tax returns.
(a) Product (b) Income (c) Expenditure (d) All of the above

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CAFC – ECONOMICS
NATIONAL INCOME
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95. …….... Method is also called Value Added of computing National Income.
(a) Product (b) Income (c) Expenditure (d) All of the above
96. The Net Values Added method of measuring National Income is also known as -
(a) Net Output Method (b) Production Method
(c) Industry of Origin Method (d) All of the above
97. Value added method is used to measure …………………
(a) National Income (b) Domestic Income
(c) Gross Income (d) Personal Income
98. The Value Added by a Firm is equal to -
(a) Its Sales
(b) Its Profits
(c) Its Sales minus Cost of Intermediate Goods
(d) Cost of producing the goods less Cost of Materials
99. Which of the following items are include computing National Income under Product
Method?
(a) Own account production of Fixed Asset Government, Enterprises & Households
(b) Production for Self-Consumption
(c) Imputed Rent of owner-occupied houses
(d) All of the above
100. In which of the following approaches is Na Income measured by calculating the
Total Val the Final Output of a country?
(a) Income Approach
(b) Product Approach
(c) Expenditure Approach
(d) No such measures exist, where final output country is considered for measuring
Income
101. The annual flow of Factor Earnings in the form of Wages, Rents, Interest and
Profits accrued from Labour, Land, Capital and Organization respectively are
taken into account in which of the following approaches to measuring
National Income?
(a) Income Approach
(b) Expenditure Approach
(c) Product Approach
(d) All the approaches consider Factor Earnings

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CAFC – ECONOMICS
NATIONAL INCOME
 93242 77778
102. Which of the following items are included in computing National Income under
Income Method?
(a) Transfer Incomes
(b) Illegal Incomes
(c) Incomes earned by Owners of Primary Factors of Production
(d) All of the above
103. Which of the following items are not included in computing National Income under
Income Method?
(a) Windfall Gains
(b) Sale Proceeds of second-hand goods
(c) Death Duties
(d) All of the above
104. Net Value Added is equal to -
(a) Payments accruing to Factors of Production
(b) Compensation to Employees
(c) Wages plus Rent plus Imputed Rent
(d) Value of Output minus Depreciation
105. ………... refers to the Income where the distinction between Capital and Labour is
not possible, e.g. income of self-employed persons.
(a) National Income (b) Mixed Income
(c) Personal Disposable Income (d) Personal Income
106. Mixed Income of the self-employed means-
(a) Gross Profits received by Proprietors
(b) Rent, Interest and Profit of an Enterprise
(c) Combined Factor Payments which are not distinguishable
(d) Wages due to Family Workers
107. Income Method does not include -
(a) Rent (b) Mixed Incomes
(c) Pensions (d) All of the above
108. …………. Sectors have expenditure in the economy.
(a) Household Sector (b) Business Sector
(c) Government Sector (d) All of the above
109. ………….. Method of measuring National Income aggregates all the money spent by
Private Citizens, Firms and the Government within a given year.
(a) Income (b) Expenditure (c) Savings (d) Input

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CAFC – ECONOMICS
NATIONAL INCOME
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110. ……….... constitutes expenditure on consumer goods and services.
(a) Consumption Expenditure (b) Investment Expenditure
(c) Both (a) and (b) (d) Neither (a) nor (b)
111. ……....... constitutes expenditure on Capital Goods.
(a) Consumption Expenditure (b) Investment Expenditure
(c) Both (a) and (b) (d) Neither (a) nor (b)
112. Which of the following is not included in Gross Investment?
(a) Additions to Business Inventory
(b) Business and Residential Constructions
(c) Expenditures on Consumer Goods
(d) Expenditures on Machinery
113. Consumption Expenditure is done by ………………… sectors of the economy
(a) Household and Business
(b) Business and Government
(c) Government and Household
(d) Household, Business and Government
114. Expenditure on Defence is -
(a) Private Investment (b) Public Investment
(c) Private Consumption (d) Public Consumption
115. Investment Expenditure is done by …………………… sectors of the economy
(a) Household and Business (b) Business and Government
(c) Government and Household (d) Household, Business and Government
116. Which is not the major source of Government Saving?
(a) Taxes (b) Surpluses of Public Enterprises
(c) Transfer Payments (d) None of the above
117. Transfer Payments refer to payments which are made
(a) Without any exchange of goods and services
(b) To workers on transfer from one job to another
(c) As compensation to employees
(d) None of the above
118. Which of the following is an example of a Government Transfer Payment?
(a) Salary paid to a Soldier
(b) Purchase of a new car for the Ministry of Finance
(c) Funding of a clinic to provide free vaccinations
(d) Free Food Coupons issued to persons as part of an anti-poverty program

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CAFC – ECONOMICS
NATIONAL INCOME
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119. Identify the item which is not a Factor Payment.
(a) Free uniform to Defence Personnel
(b) Salaries to the Members of Parliament
(c) Imputed Rent of an Owner-Occupied Building
(d) Scholarships given to Scheduled Caste Students
120. In computing National Income under Expenditure Method, the expenditure on
Final Goods and Services produced …………… is included.
(a) In the current period (b) In preceding periods
(c) Both (a) and (b) (d) Neither (a) nor (b)
121. In computing National Income under Expenditure Method, the expenditure on
………….. is excluded.
(a) Raw Materials and Intermediate Goods and Services
(b) Final Goods and Services
(c) Both (a) and (b)
(d) Neither (a) nor (b)
122. In computing National Income under Expenditure Method, Government
Expenditure on Pensions, Scholarships, Unemployment Allowance, etc. is
(a) Included (b) Excluded
(c) First included, then excluded (d) Nothing can be said
123. Under Expenditure Method, Consumption Expenditure + Net Domestic Investment
+ Replacement Expenditure equals -
(a) Gross Domestic Expenditure (b) Gross National Expenditure
(c) Net Domestic Expenditure (d) Net National Expenditure
124. Under Expenditure Method, Consumption Expenditure Net Domestic Investment +
Net Foreign Investment + Replacement Expenditure equals -
(a) Gross Domestic Expenditure (b) Gross National Expenditure
(c) Net Domestic Expenditure (d) Net National Expenditure
125. Under Expenditure Method, Consumption Expenditure + Net Domestic Investment
equals
(a) Gross Domestic Expenditure (b) Gross National Expenditure
(c) Net Domestic Expenditure (d) Net National Expenditure
126. Under Expenditure Method, Consumption Net Expenditure + Net Domestic
Investment Foreign Investment equals -
(a) Gross Domestic Expenditure (b) Gross National Expenditure
(c) Net Domestic Expenditure (d) Net National Expenditure

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CAFC – ECONOMICS
NATIONAL INCOME
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127. Which of the following relationships is true?
(a) Net Domestic Saving Net Personal Saving- Retained Earning of Domestic Companies
(b) Gross Domestic Saving Net Domestic Saving + Budget Surplus
(c) Gross Domestic Investment = Gross Fixed Investment + Change in Consumption
(d) Gross Domestic Product Consumption + Gross Investment Government
Expenditure + Net Exports
128. Net Domestic Expenditure is Consumption Expenditure plus -
(a) Net Foreign Investment
(b) Net Foreign Investment plus Net Domestic Investment
(c) Net Domestic Investment
(d) Replacement Expenditure
129. Which of the following economic policies by Governments help maintain full
employment and reasonable price stability in an economy?
(a) Monetary Policy (b) Fiscal Policy
(c) Stabilization Policies (d) Both (b) and (c)
130. Which of the following is correct?
(a) Increase in the % of per capita income is less than the increase in % of national
income
(b) Increase in the % of national income is less than the increase in % of per capita
income
(c) Per capita income rises when population increases
(d) Per capita income rises when population increases
131. In the Keynesian model, equilibrium aggregate output is determined by
(a) aggregate demand (b) consumption function
(c) the national demand for labor (d) the price level
132. Keynes believed that an economy may attain equilibrium level of output
(a) only at the full-employment level of output
(b) below the full-employment level of output
(c) only if prices were inflexible
(d) (a) and (c) above
133. According to Keynes, consumption expenditure is determined by
(a) the level of interest rates (b) extent of government taxes & subsidies
(c) disposable income (d) autonomous investment expenditure

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134. The marginal propensity to consume (MPC) can be defined as
(a) a change in spending due to a change in income
(b) a change in income that is saved after consumption
(c) part of income that is spent on consumption
(d) part of income that is not saved.
135. If the consumption function is expressed as C = a + by then b represents
(a) autonomous consumer expenditure when income is zero
(b) the marginal propensity to consume
(c) the expenditure multiplier when consumption is increased
(d) part of disposable income
136. If the consumption function is expressed as C = a + by then a represents
(a) autonomous consumer expenditure (b) the marginal propensity to consume
(c) the consumption income relationship (d) Non-linear consumption function
137. If the consumption function is C = 20 +0.5Yd, then an increase in disposable income
by ` 100 will result in an increase in consumer expenditure by ` ………….
(a) 25 (b) 70 (c) 50 (d) 100
138. If the autonomous consumption equals ` 2,000 and the marginal propensity to
consume equals 0.8. If disposable income equals ` 10,000, then total consumption
will be?
(a) 8,000 (b) 6,000 (c) 10,000 (d) None of the above
139. In the Keynesian cross diagram, the point at which the aggregate demand function
crosses the 45- degree line indicates the
(a) level of full employment income.
(b) less than full employment level of income.
(c) equilibrium level of income which may or may not be full employment level
of income
(d) autonomous level of income which may not be full employment level of income
140. In a closed economy, aggregate demand is the sum of
(a) consumer expenditure, demand for exports and government spending.
(b) consumer expenditure, planned investment spending & government spending.
(c) consumer expenditure, actual investment spending, government spending and
net exports.
(d) consumer expenditure, planned investment spending, government spending, and
net exports.
141. Under equation C= a + by, b = 0.8, what is the value of 2 sector expenditure multiplier?
(a) 4 (b) 2 (c) 5 (d) 1

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ANSWERS

1. (a) 2. (d) 3. (d) 4. (d) 5. (d) 6. (d)


7. (c) 8. (a) 9. (b) 10. (c) 11. (a) 12. (d)
13. (a) 14. (b) 15. (b) 16. (c) 17. (c) 18. (c)
19. (a) 20. (b) 21. (a) 22. (b) 23. (a) 24. (a)
25. (b) 26. (d) 27. (c) 28. (d) 29. (c) 30. (d)
31. (d) 32. (d) 33. (d) 34. (a) 35. (a) 36. (b)
37. (b) 38. (a) 39. (b) 40. (a) 41. (b) 42. (c)
43. (a) 44. (b) 45. (c) 46. (b) 47. (c) 48. (d)
49. (a) 50. (c) 51. (b) 52. (b) 53. (a) 54. (b)
55. (d) 56. (a) 57. (b) 58. (d) 59. (b) 60. (a)
61. (d) 62. (a) 63. (a) 64. (a) 65. (a) 66. (a)
67. (c) 68. (b) 69. (d) 70. (d) 71. (c) 72. (b)
73. (b) 74. (b) 75. (a) 76. (c) 77. (c) 78. (b)
79. (c) 80. (b) 81. (a) 82. (d) 83. (d) 84. (d)
85. (a) 86. (b) 87. (a) 88. (a) 89. (b) 90. (c)
91. (a) 92. (b) 93. (c) 94. (b) 95. (a) 96. (d)
97. (a) 98. (c) 99. (d) 100. (b) 101. (a) 102. (c)
103. (d) 104. (a) 105. (b) 106. (c) 107. (c) 108. (d)
109. (b) 110. (a) 111. (b) 112. (c) 113. (c) 114. (d)
115. (b) 116. (c) 117. (a) 118. (d) 119. (d) 120. (a)
121. (a) 122. (b) 123. (a) 124. (b) 125. (c) 126. (d)
127. (d) 128. (c) 129. (d) 130. (a) 131. (a) 132. (b)
133. (c) 134. (a) 135. (b) 136. (a) 137. (c) 138. (c)
139. (c) 140. (b) 141. (c)

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